Hello fellows! Hope you all are doing good. Today’s blog is about the latest announcement by The Hon’ble Finance Minister of India, Smt. Nirmala Sitharaman, who launched ₹250 crores worth the Ubharte Sitaare alternative investment fund for export-oriented micro, small and medium enterprises (MSMEs). on August 21, 2021.
The Alternative Investment Fund will be jointly sponsored by the Exim Bank of India and SIDBI (Small Industries Development Bank of India).
Aim:
It aims to provide debt and equity funding to export-oriented MSMEs as well as providing them with the required technical support to make their businesses more competitive.
The main purpose is to encourage MSMEs as they are vital to the economy in terms of creating jobs, fostering innovations and reviving the economy.
Significance:
- It identifies Indian companies that have the potential to be future champions in the domestic arena while catering to global demands.
- This will give a boost to sector-specific growth like ‘ONE DISTRICT ONE PRODUCT’ in Uttar Pradesh.
- It will enable MSME to expand their ventures will drive the overall economy, as they make up for about 45 per cent of the country’s total manufacturing output, 40 per cent of exports, and almost 30 per cent of the national GDP.
Key features of the scheme:
- It will have a Greenshoe Option of Rs 250 crore.
- The fund can support companies by both financial and advisory services through support by way of-
- equity / equity-like instruments
- Debt (funded / non-funded): Term loans for modernisation, technology/capacity up-gradation, R&D.
- In addition, Technical Assistance (TA) for product adaptation and improvement, cost of certifications, training expenses, market development activities.
- The Fund covers potential companies, across various sectors such as pharma, auto components, engineering solutions, agriculture, and software etc.
What is the Greenshoe option?
A greenshoe option is an over-allotment option, which is a term that is commonly used to describe a special arrangement in a share offering for example an IPO (Initial Public Offering) that will enable the investment bank to support the share price after the offering without putting their capital at risk. It is a provision in an underwriting agreement that grants the underwriter the right to sell investors more shares than initially planned by the issuer if the demand for a security issue proves higher than expected.
Objectives of the scheme:
- Identify and mitigate challenges faced by successful companies which hinder their exports.
- To enhance India’s competitiveness in select sectors through finance and extensive handholding support.
- To identify and nurture companies having differentiated technology, products or processes, and enhance their export business.
- To assist units with export potential which are unable to scale up their operations for want of finance.
- To assist existing exporters in widening their basket of products and target new markets through a strategic and structured export market development initiative.
What is an Alternative Investment Fund (AIF)?
An AIF refers to an investment that differs from conventional investment avenues such as stocks, debt securities, etc. It comprises pooled investment funds that invest in venture capital, private equity, hedge funds, managed futures etc. the alternative investment funds have to register with SEBI.
So, with this, we came to the end of this detailed blog about the Ubharte Sitare alternative investment fund. For more such interesting & informative blogs, stay tuned.
Thank you!
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